Coverage of food security must be reworked, factoring in trends on changing consumption spends

Aug 27, 2012, 06.41AM IST

(The Bill, currently undergoing…)

By: Rajesh Shukla

The passage of the food security Bill looks bright despite the fiscal mess and attempts to examine the ramifications of implementing the proposed law. The Bill, currently undergoing revisions, proposes to provide 'poor' sections of society, food grain in the range of 25-35 kg per month at subsidised rates depending on the category of a household: priority or otherwise.

As per the draft Bill, the priority group, comprising 46% of the rural population and 28% of the urban population, will get 35 kg of grain at a rate of Rs 1 per kg for millets, Rs 2 per kg for wheat and Rs 3 per kg for rice, while the remaining 44% of the rural population and 22% of the urban population will get 20 kg per household at 50% of the minimum support price for the grain.

In this context, an analysis of NSS data (2009-10) may be helpful for better and objective formulation of the proposed law. With the economy growing over the last two decades, there has been a noticeable shift in the composition of household consumption basket.

This is notwithstanding data limitations on account of underestimation. Firstly, as household incomes have grown, the share of expenditure allocated to food has declined at almost every point in the income distribution. There has also been a shift in the composition of the food basket itself.

For example, as per NSS consumption expenditure data (2009-10), households that belong to the priority group in rural India spend 35% of their total expenditure on cereals and cereal substitutes, while those in the next group spent around 27%. However, it is found that a considerable share of their expenditure goes into high-value food such as milk and milk products, fish, vegetables, etc.

Also, as the economic status of households rises, the share of expenditure on high-value food items increases further. Even at the lower end of the distribution, both in rural and urban areas, while there has been a reduction in the expenditure allocated to food, there has been a shift in favour of high-value food items.

The priority group (bottom 46% households) in rural areas consumes, on an average, 32 kg of rice and 20 kg of wheat per month. Similar estimates for the urban priority category households (bottom 28%) stand at 24 kg rice and 22 kg wheat per month. So, the amount to be provided by the food security Bill, ie, 35 kg of food grain to the priority-category households, is lower than they actually consume.

Revisiting the issue of the consumption basket, the priority group actually allocates roughly 18% and 14% of its total household expenditure to rice and wheat in rural and urban areas respectively. The next group that will be covered in the Bill spends roughly 13% and 10%, in rural and urban areas respectively, of its total budget on rice and wheat.

Whether the country can afford the near-universal food security Bill is a different, although integral, story. The point is that even if we argue that the food security Bill is absolutely vital, we must question its coverage. Given the undercoverage of the data when compared to private final consumption expenditure estimates from the National Account Statistics, these estimates are bound to be lower, which begs the question: is the nearuniversal nature of the proposed food security Bill fighting yesterday's battle?

The data clearly shows that as household incomes grow, there is a lowering of expenditure allocated to food and, within food, there is a shift in favour of high-value items. Apart from massive costs to the government, doubts also arise over the ability of the current system to procure food grains on a large scale and efficiently store and transport them. All these issues must be factored in before the government implements a well-intentioned initiative.